In recent years, federal and state enforcement efforts against corporate America have proceeded at a feverish pitch. As a result, familiarity with the nuts and bolts of internal investigations has become a key component of an in-house attorney’s repertoire, whether for purposes of skillfully managing outside counsel or for purposes of understanding how best to marshal internal personnel and resources to execute an investigation. Part one of this three-part series about the challenges facing in-house counsel engaged in internal investigations focuses on the unique demands posed by a lawyer’s representation of a corporate entity in these matters.
Challenge #1: The scope of representation and the corporation as client
Corporate internal investigations can be prompted by a wide variety of events — a government inquiry, an issue identified by a corporate audit, or a complaint lodged by an individual employee via a company’s compliance hotline, to name a few. But regardless of the origins of an investigation, the attorney handling the matter must keep in mind at all times that he represents the corporate entity and not any individual employee. The corporation’s counsel should strive to avoid situations that could raise questions about his duty of loyalty to the corporation and cast doubt on the objectivity of the investigation and its findings.
To that end, a lawyer handling an internal investigation must ensure that his actions never improperly subordinate the corporation’s interests to the interests of management, the board of directors, or other powerful internal (or external) constituencies. For instance, an in-house lawyer should be cautious about becoming personally involved in fact-finding efforts that focus on the conduct of senior management at his company. The inherent nature of an internal investigation could lead an in-house attorney to find himself at odds with a senior manager whose actions are under review. This could place in-house counsel in a difficult situation and may, in turn, create the appearance — justified or not — that the attorney is at risk of compromising his duty of loyalty to the corporation.
Likewise, in-house counsel should carefully consider the parameters of representation provided by any outside lawyers hired to assist in an investigation. Fidelity to this imperative may involve a delicate balancing of professional relationships. Among other things, an in‑house lawyer should consider whether asking the company’s usual outside law firm to conduct an internal investigation — possibly requiring the law firm to scrutinize the conduct of company employees with whom the law firm has a longstanding relationship — might place that firm in an uncomfortable position that hinders its ability to offer truly independent advice. To the same point, as much as a company might prefer to use an outside law firm that is already familiar with the company’s operations and personnel, it would not be prudent to ask outside counsel to investigate an issue with respect to which it has previously offered legal advice to the company. Such a scenario could give rise to a prior work conflict for outside counsel, thereby undermining the integrity of the investigation.
Finally, in the event that separate counsel are retained for individual employees, the lawyer representing the corporation must not allow those counsel to exercise outsized influence on the conduct of the internal investigation. This issue is especially likely to arise when the represented individuals are C-suite executives or other senior leaders. Although their separate counsel may become intimately familiar with the investigation and, pursuant to an appropriate joint defense or common interest agreement, may be helpful in considering the company’s strategic options, company counsel must not forget that the lawyers for individual employees ultimately do not represent the interests of the corporation. If and when the company’s interests diverge from those of a represented employee, company counsel must act for the welfare of his client — and those obligations will be more easily undertaken if appropriate professional boundaries between corporate and individual counsel have been established and adhered to from the start.
Next month’s topic
An investigatory lawyer’s special role as a representative of a corporate entity also affects the logistics of any fact-finding efforts in which he may engage, such as the need to administer an “Upjohn warning” (or “corporate Miranda warning”) at the beginning of an interview of an employee witness. Part two of this series will discuss this aspect of witness interviews and other best practices regarding fact-finding efforts performed during an internal investigation.